Opinion
NOT TO BE PUBLISHED
Alameda County Super. Ct. No. RG09435478.
McGuiness, P.J.
Appellant M.J.B. Pipeline (MJB), a corporation owned by brothers John De Freitas (John) and respondent Manuel M. De Freitas (Manuel), appeals after the trial court granted Manuel’s petition to appoint a provisional director to MJB’s board of directors pursuant to Corporations Code section 308, overruled MJB’s demurrer, and directed certain records to be filed under seal. MJB contends: (1) the trial court violated MJB’s due process rights in appointing a provisional director before it had the opportunity to file an answer; (2) there was no basis to appoint a provisional director; (3) the trial court erred in overruling MJB’s demurrer; and (4) the trial court erred in sealing certain records. We reject the contentions and affirm.
For clarity and ease of reference, we refer to John De Freitas and Manuel De Freitas by their first names. The record is inconsistent as to the spelling of their last name. We will spell it as it was spelled in the trial court’s orders.
All further statutory references are to the Corporations Code unless otherwise stated.
FACTUAL AND PROCEDURAL BACKGROUND
Manuel and John each own one-half interest in MJB and serve as MJB’s only directors. On February 10, 2009, while MJB was in the process of being voluntarily dissolved, Manuel filed a complaint for involuntary dissolution of MJB. He alleged he and John were “unable to agree on management of corporate affairs” and “unable to break the deadlock.” He alleged “[t]he parties agreed to voluntarily dissolve [MJB]” but had “reached a stalemate” and had not been able to complete the dissolution. He asked that a receiver be appointed “to take over and manage the business and affairs of [MJB]” and for a “decree that [MJB] be wound up and dissolved in the manner provided by law.”
On February 18, 2009, Manuel filed a request for dismissal of his complaint, which the trial court granted. On the same day, he filed a petition for the appointment of a provisional director. He alleged there was a vacancy on the board but that he and John had been unable to agree on the appointment of a third director. He alleged, as he did in his complaint, that there was a deadlock regarding the “management of corporate affairs, ” and asked the court to appoint a provisional director who would “have all the rights and powers of a director... until the deadlock in the board is resolved and broken.” Manuel submitted a declaration in support of the petition, declaring he and John had been unable to agree regarding “many of the issues that must be resolved in order to complete the dissolution, ” including the appointment of a third director, layoffs, deciding “who should perform the accountings and maintain the records, ” “disputes as to monies owed, ” “how remaining employees should be compensated, ” and “even... how to divide up the Oakland Raiders tickets.” He declared that as a result of “the deadlock, ” the voluntary dissolution “is at a standstill” and MJB’s “current projects cannot be conducted advantageously and there is a risk that [its] property or business may be impaired.” Manuel also submitted a memorandum of points and authorities in support of the petition. On February 20, 2009, the trial court issued an order to show cause why a provisional director should not be appointed.
Manuel testified he made a mistake when he filed the complaint “asking for a receivership [because] it should have been a provisional director.”
On March 9, 2009, “attorneys for John De Freitas on behalf of Defendant M.J.B. Pipeline, Inc., a California corporation, ” (John’s attorney) filed evidentiary objections to various statements in the petition and in Manuel’s declaration. On the same day, John’s attorney filed “points and authorities in opposition to petition for appointment of provisional director, ” stating there were “procedural deficiencies in the petition, ” including the fact that John was not named “as a defendant, or a respondent, ” and stating the petition was also “substantively defective” because “no factual basis exists for the appointment of a provisional director.” John submitted a declaration in opposition to the petition, declaring there was no deadlock regarding most of the issues set forth in Manuel’s declaration. John acknowledged there was a disagreement as to how a particular employee should be compensated but stated this was “a matter [that] will be resolved as part of the ultimate accounting and dissolution of [MJB], ” and “not a matter [that] can be resolved by a provisional director.” John submitted a letter from Manuel to show they were not in disagreement regarding some issues.
Also on March 9, 2009, John’s attorney filed a demurrer to the petition “on the ground that there is a defect in the pleading by failing to name a necessary and/or indispensable party and that as a result the pleading does not state facts sufficient to constitute a cause of action.” On April 6, 2009, Manuel filed an opposition to the demurrer, asserting John was “not a necessary or indispensable party, ” and requesting leave to amend the petition in the event the court sustained the demurrer. John’s attorney filed a reply brief on April 10, 2009.
Hearings were held March 19, April 1, and April 20, 2009, regarding the appointment of a provisional director. Three witnesses testified. Former MJB employee Cindi Michalak testified she began working for MJB on July 14, 2000. She “did all the administrative functions” as the operations manager and started writing payroll checks on June 1, 2008. She testified regarding incidents that occurred as a result of the brothers disagreeing on various issues “over the past seven months.” She testified that in “late 2008, ” John told her not to pay a certain employee for a 40-hour week if the employee did not work 40 hours. Manuel told her “to keep paying [the employee] the way he had been paid for years.” When Michalak told John that Manuel had given her these instructions, John said “I’ll fix that, ” ran downstairs to Manuel’s office, and yelled at Manuel. John “was leaning over the desk, ” “was kind of in [Manuel’s] face, ” “was very aggravated, ” and “was swearing a lot.” Manuel told Michalak, “keep doing what you are doing [regarding the employee’s checks], ” and Michalak was not sure whose instructions to follow. When she continued to pay the employee for 40-hour weeks, John did not sign some of the checks.
Michalak was terminated from her employment with MJB on March 5, 2009.
Michalak testified that the incident relating to the employee’s checks was not “an isolated incident” and that people in the office were “a little bit fearful” due to the “tension [that] was created.” Michalak testified that during another incident, a co-worker “wondered if she should call the police because things were so heated during that encounter” and it appeared John might try to hurt Manuel. The co-worker stayed in Michalak’s office “while waiting for things to calm down.” Michalak testified there was a lot of anxiety among the staff and it was difficult to know what to do when the brothers disagreed. John often did not sign a check or ripped a signature out of a check because he did not want the check to go out. There were times when Manuel did not want something to be paid. When the brothers disagreed, the employees had no choice but to use their best judgment as to what they thought was best for the company.
Manuel testified he and John were each 50 percent owners of MJB. He testified that another partner, Bunny Chang, had a 10 percent interest in MJB until Chang retired in or about 1998. Manuel described some of the tasks that remained before MJB could be dissolved and said he would like to dissolve MJB “as soon as possible, within the next 30 days to 60 days or sooner, ” because they were spending about $125,000 a month on overhead to run the company. He testified he wanted to start his own company and had asked John if he could start bidding work under his new company. John, through his attorney, responded he did not want Manuel to start a new business and did not want Manuel to “bid work away from the business.” Manuel testified he would not be taking any work away from MJB because MJB was “not bidding any more work.” Manuel testified he had not paid his attorney for some of the work the attorney had performed because John tore Manuel’s signature from the check that was addressed to the attorney. Manuel also testified that he and John disagreed as to which employee should be let go. He was “shocked” when John terminated Michalak’s employment without speaking to him about it because until that time, they (John and Manuel) had agreed that Michalak was the best office employee. On cross-examination, Manuel acknowledged that his attorney wrote to John to tell him he could chose which of the employees, including Michalak, to let go.
Manuel further testified he did not obtain John’s consent to hire a tax advisor or to issue checks to the advisor, and that he did not know whether he provided John with a copy of a written report the advisor had prepared. He testified he and John disagreed as to whether they should hire a woman named Shelley Lamar as an employee. They were supposed to hire Lisa De Freitas (Manuel’s daughter) but John “found” Lamar and hired her from an outside agency. Manuel was unhappy with Lamar because “she takes too long” and he does not “know when she’s coming to work.”
Also on cross-examination, Manuel testified he was previously an officer of a company called Platinum Pipeline at the same time he was an officer and director of MJB. John’s attorney submitted into evidence a “set of minutes” referring to Platinum Pipeline, as well as a document from the Contractors State License Board showing Manuel was an officer of Platinum Pipeline. Manuel testified he was no longer an officer of Platinum Pipeline and that he had submitted a document to the Contractors State License Board asking to be removed as an officer. John’s attorney argued that Manuel was requesting that a provisional director be appointed for an improper purpose, i.e., so that “he could go do business with [Platinum Pipeline].”
John testified he had not had any discussions with Manuel in the last two years about appointing a third director. During cross-examination, Manuel’s attorney introduced into evidence an August 2008 letter in which Manuel suggested to John that they appoint a provisional director due to disagreements they were having. He also introduced into evidence a February 2009 letter in which Manuel asked for John’s cooperation in agreeing on a third party to “make decisions and oversee the windup.” John testified it was going to “probably take five, six weeks max” to complete MJB’s remaining work, “[d]epending on when [the projects] go.” On cross-examination, he testified he could only “guess” when the projects would be completed and that it could be a few months, or even six months, before they were completed because it is “up to the developer as to when they start their projects. They tell us when to work. We don’t tell them.” He testified there were various tasks that remained in the process of winding down MJB, including layoffs, $3.6 million in receivables to collect, completing work as contracts come in, managing the staff and responding to customer calls, attempting to “hand off” some of the work to another company, looking at “ ‘tail’ coverage insurance, ” deciding “on an option remanding equipment, ” deciding which auction house to use, distributing funds when collected, and dealing with the lease and life insurance policy.
John further testified he believed Lamar should be kept as a contract worker for the company because she is the most knowledgeable about winding down the corporation. He disagreed with Manuel as to whether his (John’s) son, another employee of MJB, should be laid off. John acknowledged he had not paid Manuel’s attorney or consultant for some of the work they had performed.
After closing arguments, the court took the matter under submission and issued an order on April 13, 2009, stating, “the Court finds that Petitioner has established by a preponderance of the evidence that the allegations of the Petition are true, and that the two equal shareholders are and have been unable to agree in a timely, orderly way on important decisions that must be made to effectuate the mutually desired wind-up of the Defendant corporation’s business affairs. As a result, the property and/or business of the corporation are manifestly at risk. Accordingly, the Court concludes that a provisional director empowered under the law to break the frequently occurring deadlocks between the two brothers should be appointed.” The trial court appointed Chang as provisional director of MJB.
On April 20, 2009, the trial court overruled the demurrer, stating, “Mr. John De Freitas is, obviously, a party of the lawsuit having testified at length at it already. And I think that the lawsuit can go forward as is. You have statutory time to file an answer or other pleading, and do we have anything set in the future in this case?” The parties responded there was nothing set and agreed that the order appointing a provisional director was the equivalent of a judgment in the case. John’s attorney added, “We think that is a problem because of lack of an answer but that is where we are.” The trial court stated, “Well, I want to set a date so the case doesn’t slip away from us. Obviously, if there is a contention that the order I made is or can be construed as a final judgment and should be, you should file a notice of judgment. And if you want any sort of opposition for whatever record you want to make, do that but that will be that.” On April 21, 2009, the trial court issued a written order directing records to be filed under seal. On April 22, 2009, John’s attorneys filed a timely notice of appeal stating, “Respondent [MJB] hereby appeals from the Orders entered in this matter on April 13, 2009 (Order Appointing Provisional Director) and April 21, 2009 (Order Directing Records to be Filed Under Seal).”
DISCUSSION
Answer
MJB contends the trial court denied “its due process rights to have a responsive pleading on file before a judgment was taken.” Specifically, it argues it should have been allowed to file an “Answer, ” which would have “frame[d] the issues for trial.” We conclude MJB forfeited this argument by failing to object in a timely manner.
Manuel contends MJB did not have the right to file an “Answer” in addition to the various other documents it filed in opposition to the petition. He relies on Marsh’s California Corporation Law, which provides: “It would seem that the court should have the power to appoint a provisional director as a provisional remedy merely upon the basis of affidavits and whatever testimony the court may desire to take, as in the case of a preliminary injunction [which may be obtained by service of an order to show cause, memorandum of points and authorities, and affidavits, under Code of Civil Procedure section 527]. The salutary purpose of this section [for the appointment of a provisional director] would be frustrated if it were held that, in all cases, the court had to wait to do anything until the case had been calendared and tried.” (2 Marsh’s Cal. Corporation Law (4th ed., 2010-2 supp.) § 15.05, p. 15-23.) Manuel also relies on Matthew Bender, California Forms of Pleading and Practice, section 167.31, which states, “Since the need for speedy relief is apparent from the nature of the proceeding, the court may decide to order issuance and service of an order to show cause followed by a prompt hearing and rendition of judgment.” We need not decide whether a corporation has a right to file an “Answer” to a petition for the appointment of a provisional director because we reject MJB’s contention on other grounds.
A claim of error will be deemed to have been forfeited when a party fails to bring the error to the trial court’s attention by timely motion or objection. (E.g., In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 826; see also Imperial Bank v. Pim Electric, Inc. (1995) 33 Cal.App.4th 540, 546 [appellate courts will not reverse for procedural defects that could have been challenged below]; Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184-185 [same].) “The requirement of an objection is premised upon the idea that a party should not sit on his or her hands, but instead must speak up and provide the court with an opportunity to address the alleged error at a time when it might be fixed,” (Keener v. Jeld-Wen, Inc. (2009) 46 Cal.4th 247, 266, emphasis added.)
MJB contends that the “purpose of [an] Answer is to frame the issues for trial, ” and asserts that “if an Answer is not on file, but the trial is nonetheless held, the issues may become muddled, misunderstood and never properly considered.” Here, MJB appeared in court and acquiesced to the matter being heard before an Answer had been filed. It did not inform the court that it had not filed an Answer, nor did it object on that ground. Instead, it proceeded to cross-examine Manuel’s witnesses, call its own witness and present evidence, and make arguments in opposition to the petition. It was not until after all of the witnesses had testified and all of the evidence had been presented that John’s attorney argued in closing that a provisional director should not yet be appointed and mentioned, “Procedurally, we don’t even have responsive pleadings on file.” If the purpose of an Answer was, as MJB argues, to “frame the issues for trial, ” and MJB wished to file an Answer in order to do so, it should have raised the issue before the court had heard all of the evidence and testimony in the case. Because it failed to do so, it has forfeited the issue.
In any event, MJB has demonstrated no prejudice-a requirement for reversal on appeal. (Cal. Const., Art. VI, § 13 [error must have resulted in miscarriage of justice]; Cal. Code Civ. Proc., § 475 [court must disregard error that does not affect parties’ substantial rights and where it is not shown that different result would have obtained absent the error].) In asserting its due process rights were violated, MJB relies on McClatchy v. Superior Court (1897) 119 Cal. 413, 418, 420, and Motores De Mexicali v. Superior Court (1958) 51 Cal.2d 172, 176, but in those cases, the defendants were not allowed to present any defenses and were denied the opportunity to be heard. In contrast, here, MJB filed various documents in opposition to the petition, including evidentiary objections, a memorandum of points and authorities, a declaration, and a demurrer, raising various procedural and substantive deficiencies and arguing against the appointment of a provisional director. MJB appeared at the hearings and cross-examined Manuel’s witnesses, presented its own witness and evidence, and made arguments in opposition to the appointment of a provisional director. There is nothing in the record indicating that the lack of an Answer deprived MJB of its due process right to be heard or to present a defense.
MJB suggests that if allowed the opportunity to file an Answer, it could have raised the “affirmative defense” of Manuel’s “bad faith, ” and the trial court would not have been impatient in allowing cross-examination of Manuel regarding “statements made under penalty of perjury” in his complaint, petition and declaration “which would tend to demonstrate [his] lack of good faith and lack of credibility.” However, the record shows MJB was allowed to cross-examine Manuel regarding statements made in his complaint, petition and declaration, and that the trial court had the opportunity to observe Manuel to determine his credibility. The record also shows the trial court was not “impatien[t], ” but simply sustained objections and limited the questioning on the ground the questions sought legal conclusions or information protected by the attorney-client privilege.
MJB complains the trial court “also appeared to be unwilling to consider [Manuel’s] role as the officer of a competing company while he was at the same time serving on the Board of Directors and as the President of [MJB].” However, MJB was allowed to question Manuel regarding his connection to Platinum Pipeline and explain its position that Manuel was seeking the appointment of a provisional director for an improper purpose, i.e., so that “he could go do business with [Platinum Pipeline].” The trial court also accepted into evidence the corporate minutes purporting to show that Manuel was seeking to do, or was already doing, business with Platinum Pipeline. The trial court commented that the relevance of the issue to the case seemed “marginal, ” but this was appropriate in light of the fact that the only question before the court was “whether there is a deadlock and not why such deadlock may exist,” (In re Jamison Steel Corp, (1958) 158 Cal.App.2d 27, 39, emphasis added [it was not relevant that directors voted in a certain way “for the sole purpose of procuring the appointment of the provisional director and... ultimately obtaining control of the corporation].) MJB has failed to show it was prejudiced by the lack of an Answer.
Demurrer
MJB contends the trial court erred in overruling its demurrer because John was a necessary and indispensible party to the action. “An order overruling a demurrer is not directly appealable, but may be reviewed on appeal from the final judgment. [Citation.]” (Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 182.) “The standard of review for an order overruling a demurrer is de novo.” (Ibid.)
“It is fundamental that a person should not be compelled to defend himself in a lawsuit when no relief is sought against him.” (Weisman v. Odell (1970) 3 Cal.App.3d 494, 498 (Weisman).) In Wiseman, minority shareholders sued a corporation and its majority shareholders seeking to dissolve the corporation because the majority shareholders had operated the entity for their own benefit at the expense of the minority. (Id. at p. 496.) No direct relief or damages were requested against the majority shareholders. (Ibid,) The majority shareholders successfully demurred to the complaint, and the decision was affirmed on appeal. (Id. at p. 499.) Because the “sole relief sought” was the dissolution of the corporation, the majority shareholders could “not be compelled to be parties defendant under the pleadings....” (Ibid.; see also In re FairWageLaw (2009) 176 Cal.App.4th 279, 286 [shareholders are not parties to a dissolution unless they are named as defendants or they intervene, and shareholders cannot be named as defendants unless the petition seeks relief against them].)
MJB notes that all of the primary shareholders were named as parties in In re Jamison Steel Corp,, 158 Cal.App.2d 27, and In re ANNRHON, Inc. (1993) 17 Cal.App.4th 742, both of which involved the appointment of a provisional director. However, the propriety of naming shareholders to an action for the appointment of a provisional director was not at issue in these cases. The fact that shareholders were named and did not object to being named does not mean they were indispensable parties.
The appointment of a provisional director is “merely a method of resolving disagreements between directors” and is a statutory remedy “available to protect the rights of the parties and does not reflect upon the financial standing or good name of the corporation nor does it take the property out of the hands of the owners or the persons actually administering its business.” (In re Jamison Steel Corp,, supra, 158 Cal.App.2d at pp. 35, 36.) Here, the sole relief sought was the appointment of a provisional director to assist in completing the voluntary dissolution process in a timely manner, and no direct relief or damages was sought against John. Although John, like the majority shareholders in Weisman, will be affected by the trial court’s ultimate decision appointing a provisional director, he is not liable for any damages as a result of the appointment. Thus, he was not an indispensable party to the action, and the trial court did not err in overruling the demurrer. (Weisman, supra, 3 Cal.App.3d at p. 499; see also In re FairWageLaw, supra, 176 Cal.App.4th at p. 286.)
Moreover, we note that John effectively intervened in the action by fully participating in the proceedings through his attorneys-“attorneys for John De Freitas on behalf of [MJB].” (Emphasis added.). (See Tyrrell v. Baldwin (1885) 67 Cal. 1, 4 [defendants’ substantial rights were not affected where they were not named in the action but fully participated in the proceedings].)
Provisional director
Appellant contends “there was no statutory or factual basis sufficient for the appointment of a provisional director.” We reject the contention.
Section 308, subdivision (a), provides that a court may appoint a provisional director to a corporation if the “corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its business can no longer be conducted to advantage or so that there is danger that its property and business will be impaired or lost....” “The provisional director thus acts as a ‘tie-breaker’ when a deadlock exists between an even number of directors.” (In re ANNRHON, Inc., supra, 17 Cal.App.4th at p. 751.) An order appointing a provisional director is reviewed under the abuse of discretion standard. (Ibid,; In re Jamison Steel Corp,, supra, 158 Cal.App.2d at p. 35) Thus, we will not disturb the trial court’s rulings unless there is a “ ‘showing of a “clear case of abuse” and “a miscarriage of justice.” ’ [Citation.]” (In re ANNRHON, Inc., supra, 17 Cal.App.4th at pp. 751-752.)
There was ample evidence of disagreements between the brothers. They were deadlocked over how an employee should be paid, to the point where John was yelling, “swearing a lot, ” and refusing to sign some of the employee’s checks. Employees were “a little bit fearful” due to the “tension [that] was created, ” and during one incident, an employee waited in a co-worker’s office until things “calm[ed] down” and wondered if she should call the police because it appeared John might try to hurt Manuel. When the brothers disagreed, employees were left to figure out on their own what needed to be done. Both brothers refused to sign checks when they did not agree as to who should get paid. John ripped Manuel’s signature off of checks in order to prevent them from going out and refused to pay Manuel’s attorney and consultant for some work they had performed. Manuel hired a tax advisor and issued a check to the advisor without obtaining John’s consent. The brothers also disagreed as to which employees should remain employed as MJB was being dissolved. Manuel described some of the tasks that remained before MJB could be dissolved and testified that approximately $125,000 was being spent on overhead each month to run a corporation that was “not bidding more work.” Under these circumstances, the trial court reasonably determined that the brothers disagreed “as to the management of [MJB’s] affairs, so that its business can no longer be conducted to advantage or so that there is danger that its property and business will be impaired or lost.” (§ 308.) Thus, the appointment of a provisional director was proper.
John testified that before MJB could be dissolved, he and Manuel would have to make decisions relating to the remaining employees, complete projects or attempt to “hand [them] off” to other companies, collect receivables, manage the staff and respond to customer calls, look at “ ‘tail’ coverage insurance, ” decide “on an option remanding equipment, ” decide which auction house to use, distribute funds when collected, and deal with the lease and life insurance policy.
MJB cites to Belio v. Panorama Optics, Inc. (1995) 33 Cal.App.4th 1096, 1098-1099 in support of its position that this case merely involves dissension, not deadlock. The case is inapposite because one of the shareholders owned 54 percent of the corporation’s stock and there was no showing that a simple majority vote was insufficient for the corporation to conduct its business. Here, of course, there are two equal owners.
Sealing of records
Background
At the March 19, 2009, hearing, during opening remarks, Manuel’s attorney informed the court that he wished to have admitted into evidence 12 letters between the brothers’ attorneys dated August 4, 2008, to March 2, 2009, “that show just constant disputes between John and Manuel about decisions that effect the day-to-day operation of MJB.” John’s attorney stated he objected to the documents being admitted “at this point” because he had not seen what portions of the letters had been redacted. He asked for “a chance to review the redactions in particular, ” and the court granted the request.
The letters were redacted to the extent they referenced “confidential settlement negotiations and a confidential settlement agreement.”
At the beginning of the April 1, 2009, hearing, John’s attorney stated he had submitted a letter to the court stating he would be willing to allow the letters to be admitted into evidence unredacted and “accompanied by the settlement agreement which would require the Court to make an order to that effect.” Manuel’s attorney objected on the ground that the settlement agreement was, “by its term, ... confidential, ” and also was irrelevant to the proceedings. The court asked whether it made sense “from a common sense point of view knowing nothing about what the settlement agreement settled or what the dispute was, ” for the court to have access to the unredacted letters and settlement agreement “as long as [they are] kept out of the public view in the public files.” Manuel’s attorney stated, “if what we’re doing is... sealing the... exhibits, ... then I guess I don’t have a problem with your Honor having it.... But I just want to make sure we don’t have a situation where now this agreement, which was designed to be confidential [and] was designed to protect not just us in terms of confidentiality but... other parties... [is] a public record now. As long as that is the case, I don’t have a problem with it.” The court stated, “All right.... I’m going to receive [into evidence]... a series of correspondence. And order that the offering party... withdraw each of the letters that contains redactions and [re]place those letters with the unredacted versions of the letters.” It continued, “And that once the exhibit is constituted, it will be filed with an appropriate sealing order so that, although, the Court will have access to it in exercise of its responsibilities in this matter, it will not be made part of the public record in this case and it will remain under seal until further order. I will also order [Manuel] to offer as Exhibit 2, the settlement agreement referred to, subject to the same sealing orders as I just articulated.”
It appears that John, Manuel, and “third parties” executed the confidential settlement agreement on July 23, 2008, but the record does not reveal what disputes the agreement resolved. According to Manuel’s attorney, the brothers’ relationship began to deteriorate after they signed this agreement, and the issue of appointing a provisional director was raised as early as August 4, 2008.
On April 21, 2009, the court issued an order sealing records, finding “facts that establish: [¶] 1. There exists an overriding interest that overcomes the right of public access to the records specified below, in that [Manuel and John] entered into a confidential settlement agreement. [¶] 2. This overriding interest supports sealing the records specified below. [¶] 3. A substantial probability exists that this overriding interest will be prejudiced if the records specified below are not sealed, in that the parties’ binding contractual obligations not to disclose will be violated. [¶] 4. The records specified below have been tailored to limit narrowly the overall records to be sealed. [¶] 5. No less restrictive means exist to achieve the overriding interest than to seal the records specified below.” The trial court ordered that several excerpts from the attorneys’ letters and the entire confidential settlement agreement be sealed.
Discussion
MJB contends the trial court erred in sealing the unredacted letters and confidential settlement agreement because proper procedures for the sealing of records were not followed. Manuel responds that MJB waived the issue and/or invited any error because MJB is the one that requested the confidential records to be admitted into evidence without following the proper procedures. He states that appellant’s “effort to now portray himself as an aggrieved member of the public is at best disingenuous.”
California Rules of Court rule 2.551 sets forth the procedural requirements for moving to seal records. Rule 2.551(b)(1), provides: “A party requesting that a record be filed under seal must file a motion or an application for an order sealing the record. The motion or application must be accompanied by a memorandum and a declaration containing facts sufficient to justify the sealing.” Rule 2.551(b)(3), provides: “(A) A party that files or intends to file with the court, for the purposes of adjudication or to use at trial, records produced in discovery that are subject to a confidentiality agreement or protective order, and does not intend to request to have the records sealed, must: [¶] (i) Lodge the unredacted records subject to the confidentiality agreement or protective order and any pleadings, memorandums, declarations, and other documents that disclose the contents of the records, in the manner stated in [Rule 2.551] (d); [¶] (ii) File copies of the documents in (i) that are redacted so that they do not disclose the contents of the records that are subject to the confidentiality agreement or protective order; and [¶] (iii) Give written notice to the party that produced the records that the records and the other documents lodged under (i) will be placed in the public court file unless that party files a timely motion or application to seal the records under this rule. [¶] (B) If the party that produced the documents and was served with the notice under (A)(iii) fails to file a motion or an application to seal the records within 10 days or to obtain a court order extending the time to file such a motion or an application, the clerk must promptly remove all the documents in (A)(i) from the envelope or container where they are located and place them in the public file. If the party files a motion or an application to seal within 10 days or such later time as the court has ordered, these documents are to remain conditionally under seal until the court rules on the motion or application and thereafter are to be filed as ordered by the court.” “The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.” (Rule 2.551(a).)
All references to the rules are to the California Rules of Court.
Here, the above procedures were not followed. MJB, as the party that “intend[ed] to file” the unredacted letters and confidential settlement agreement for “use at trial” and did not “intend to request to have the records sealed, ” should have followed the procedures set forth in rule 2.551(b)(3), e.g., lodging and filing the documents in specified ways and providing written notice of its intent to file the records. It did not do so. Manuel-who initially attempted to file the redacted letters, then became aware at or around the April 1, 2009, hearing that MJB wished to file the unredacted letters and confidential settlement agreement-did not follow the procedures set forth in rule 2.551(b)(1) that a party must follow in order to obtain a sealing order. Thus, neither party had complied with the rules of court when the trial court proposed the “common sense” approach of admitting the records into evidence under seal, and then proceeded to issue a sealing order, based essentially on the parties’ agreement (or acquiescence) to the sealing of the records.
We note that the court’s sealing order states that Manuel requested the records be sealed. However, the discussion that took place among the parties and the court on April 1, 2009, shows the court took the “common sense” approach of sealing the records based more on the court’s suggestion and the parties’ agreement or acquiescence than on Manuel’s request.
We believe Manuel has a strong argument that MJB waived the issue and/or invited any error by requesting that the confidential records be admitted into evidence, failing to follow the procedures set forth in rule 2.551(b)(3), and acquiescing to the sealing of the records. (See Rheem Mfg. Co. v. United States (1962) 57 Cal.2d 621, 626 [waiver may stem from conduct “which, according to its natural import, is so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished”]; In re Marriage of Broderick (1989) 209 Cal.App.3d 489, 501 [“[W]here a party by his conduct induces the commission of an error, under the doctrine of invited error, he is estopped from asserting the alleged error as grounds for reversal. [Citations.] Similarly, an appellant waives his right to attack error by expressly or implicitly agreeing or acquiescing at trial to the ruling or procedure objected to on appeal. [Citations.]”].) In addition, we fail to see how the sealing of the records has harmed MJB in any way, as MJB and/or John was apparently a party to the confidential settlement agreement and is aware of its contents. (See Code Civ. Proc., § 902 [a party must be aggrieved by a judgment or order to appeal the judgment or order]; Life v. County of Los Angeles (1990) 218 Cal.App.3d 1287, 1292 [“One is considered aggrieved whose rights or interests are injuriously affected by the judgment. An appellant’s interest ‘ “ ‘must be immediate, pecuniary, and substantial and not nominal or a remote consequence of the judgment’ ” ’ ”].) Nevertheless, we recognize that constitutional issues and the public’s interests are involved in the sealing of court records. (See NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1212, 1225 [there is a First Amendment right to documents used at trial or as a basis of adjudication]; Savaglio, supra, 149 Cal.App.4th at p. 600 [“The rules for sealing records are mandatory, furthering the presumption and constitutional interest in open records”].) Thus, in an abundance of caution, we remand the matter to the trial court so that on remand, either party may request to have the confidential records admitted into evidence and the trial court, after determining whether the records are relevant and admissible, shall order the records sealed only if proper procedures are followed and adequate showings are made.
Relying on Savaglio v. Wal-Mart Stores, Inc. (2007) 149 Cal.App.4th 588 (Savaglio), John argues that Manuel waived the right to have the confidential materials sealed. Savaglio, however, is distinguishable. There, the Court of Appeal held that Wal-Mart had waived its right to obtain a court order sealing certain documents where it had publicly filed the documents in two parallel cases and requested to have them sealed only after a local newspaper sought to obtain copies of the documents. (Id. at pp. 594-595, 600-601.)
Manuel objected to the admission of the confidential materials in the letters and the confidential settlement agreement on the ground they were irrelevant, and reasserts the objection on appeal. The trial court did not rule on the objection, as it made its “common sense” proposal and subsequent order without having reviewed the materials.
DISPOSITION
The matter is remanded to the trial court for the limited purpose of providing the parties with the option of requesting admission of confidential records into evidence for the trial court to determine their admissibility. The trial court shall order the records sealed only if proper procedures are followed and adequate showings are made. The trial court’s orders appointing a provisional director and overruling MJB’s demurrer are affirmed. Respondent is awarded his costs on appeal.
We concur: Siggins, J., Jenkins, J.